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Towards RetailCraft: Formulating the Footprint

Martin Shaw, our new Reseacher, has been head-high in data since joining InternetRetailing last year, quietly squirreling away at the data-trove behind the Top 500. His objective was to look behind the turnover and traffic numbers and understand the dimensions of performance, the basis of ‘retailcraft’. Here he explains the first step – creating the Footprint Report.

Before arriving at a measure of performance, it is necessary to decide who will be measured. This is the first stage of our research to identify those retailers with the largest footprint in our industry: the biggest, highest-impact, front-of-mind multichannel retailers. We purposely extended our list to 500 since outside of the very largest retailers there’s a wealth of innovation, growth, capability and variety. Our definition of Footprint comprises total UK retail revenues, ecommerce (and of course mobile) sales percentage, the internet reach (the proportion of all web traffic that they achieve) and their store or physical footprint. As you can imagine, these components mean that we have retail giants, eCommerce leviathans, web traffic titans and store behemoths – in a few cases all factors come together in veritable colossi!

To create our initial list we cast a wide net, seeking to identify which of the 190,000 UK retail businesses we should include in our deeper research. We looked at our own subscriber base and Linkedin Group, covering over 100,000 professionals, the retailers they work for and those we write about in InternetRetailing. We then asked our readers and the supplier community for suggestions, and finally we hit the streets and walked malls, departments stores and villages looking for names we may have missed. Checking the largest retail and brand web destinations rounded out the initial scoping and gave us 5,600 companies to research.

Refining

We excluded retailers who had no ecommerce activities (a surprising number!) or whose UK presence was a marketing website and not a fully transactional one. Removing retailers who had no filed financial information at Companies House brought us down to a long-ish list of some 1800 companies.

Problematic criteria

The components of the Footprint - total turnover, eCommerce and mobile turnover, digital store reach and physical stores each have their own challenges when it comes to assessment and ranking. All stores are not equal; the Harrods store is not equivalent to a Tesco Express, either in terms of size, turnover or column-inches of coverage in the press, let alone its place in the customer’s imagination. Furthermore, not all stores under a retail brand are similar: M&S’ 766 UK stores range from small convenience food-only stores at major stations to their Cheshire Oaks environmental megastore, with any number of variations in between.

We amended the ‘raw’ number of stores in our assessment to consider the extent to which the stores support multichannel. Stores with no click and collect capabilities were discounted, while retailers with fully multichannel capabilities saw their footprint enhanced.

Similarly web traffic volumetrics are an imperfect measure of online reputation, but by taking the same measure across all of the companies we could at least be confident in the comparative reach, and the proportion of customer attention the retail brands command.

Biggest is not necessarily best

By measuring footprint in this manner we are not saying big is better, just that big is significant and ‘big’. Today’s retail giants have gained their size as a result of past success and in our next phase we¹ll examine their capabilities with a view to understanding that success. However, the range of the Top 500 gives us a view on who to monitor, and gives us a baseline from which to judge future growth, change and success. Big companies may get even bigger, stall or decline. Smaller businesses may inspire change in other companies and so have an impact beyond their size. Other smaller, newer retailers are being watched due to their digital success; they are innovative, disruptive and future Top 500 reports will explore whether and how they change the nature of retail. We extended our research to companies not normally thought of as ‘retailers’ but whose use of retailing techniques and presence in the marketplace make them relevant to an analysis of multichannel performance.

Gamut

When we rank the retailers on our four dimensions the resulting gamut is very wide. Turnover span is from Tesco’ s £44bn at the top of our table to and exceptional £3m at the bottom (although the average for the bot tom quartile is £17million).

The number of stores ranges from zero (obviously) for the pureplay e-tailers to the Post Office’s 11,500 branches, while the digital penetration ranges from single-digit percentages to 100% In terms of reach the larger companies are some of the most popular websites in the UK, but at the other extreme some of our retailers did not get into the top 100,000.

When we combine these results into our assessment algorithm the resulting Footprint Score extends the full gamut from 6,000,000 to 1. This means that enumerating these retailers equally over 500 places doesn’t do full justice to the extent to which the very largest retailers dominate those lower in the results.

Three groupings emerge from the plotted distribution. Firstly, the top fifteen to twenty retailers whose enormous footprints throw them above the line-of-best-fit. Secondly, a larger middle section extending to around the hundred mark. Finally a dip down to a lower trend-line for the next four hundred-plus. This distinction forms the basis of the Top 100 and Next 400 split contained in this supplement, however we’ve extended the footprint slightly beyond the 100 since there'll be a degree of movement as we research more deeply.

It’s no surprise to see in the leading cluster retailers like (alphabetically) Amazon, Argos, ASDA, Boots, Dixons Retail, John Lewis, Marks & Spencer, Next, Sainsbury’s and Tesco.

The Top100 is set out later in this supplement and we welcome your thoughts on whether we’ve captured the most prominent and sizeable retailers, worthy of the next 6 months of investigation into their operating capabilities and prospects. If you have suggestions for inclusion, information on the companies listed, or feel you have been excluded unfairly then we’re keen to hear from you. Contact us at [email protected] with your thoughts.

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